Chinese carriers scrap ships to cope with overcapacity-driven downturn

CHINESE carrier Ningbo Marine Company Limited recently announced that it will sell its Mingzhou 28 vessel at a loss as scrap for CNY28.45 million (US$4.47 million), Xinhua reports.

The company said the decision was made in view of gloomy market, falling freight rates and high operating costs. According to Ningbo Marine's announcement, the "Mingzhou 28" vessel will need check-up and maintenance when its classification certificate expires at the end of June. The maintenance cost will be over CNY4 million.

Earlier in April, the company had sold its 34-year-old Mingzhou 3 vessel as scrap. Commenting on this, shipping analysts said, selling old ship might be a wise decision as the market is depressed with short-sea shipping rates continuing to fall. In fact, a number of other carriers are also disposing of their old ships to relieve pressure including Cosco and China Shipping

Cosco Shipping's annual report for 2011 shows that the company sold 11 old ship with original worth of CNY470 million at a price of CNY58.71 million, bringing an increase of 114.26 per cent to its non-operating revenue.

China Shipping Development also sold 10 old ships last year and obtained an non-operating profit of CNY169 million last year. The carrier also sold two bulk carriers at the end of May for CNY32.54 million.